First Internet Bancorp announced its financial results for the second quarter ended June 30, 2025, reporting net income of $0.193 million and diluted earnings per share of $0.02. This marks a significant decline in profitability, primarily due to ongoing credit issues within its franchise finance and small business loan portfolios. The company has now delivered seven consecutive quarters of rising net interest income, reaching $28.0 million, up from $25.1 million in the first quarter of 2025.
The net interest margin (NIM) continued to improve, reaching 1.96%, up from 1.82% in the prior quarter, driven by increased yields on earning assets and lower funding costs. The cost of interest-bearing deposits declined to 3.92%, with the weighted average cost of new CDs at 4.27%, 60 basis points lower than maturing CDs. Noninterest income, however, decreased to $5.6 million, down from $10.4 million in the first quarter, primarily due to an 80.7% decline in gain on sale of loans to $1.7 million, attributed to a process change to hold SBA loans longer before selling.
Asset quality continued to deteriorate, with nonperforming loans increasing to $43.5 million, or 1.00% of total loans, up from $34.2 million at March 31, 2025. Net charge-offs were elevated at $14.3 million, primarily in small business lending ($11.9 million) and franchise finance ($2.2 million). The provision for credit losses increased to $13.6 million, up from $11.9 million in the first quarter. Management provided guidance for Q3 2025, projecting FTE net interest income of approximately $33.5 million and FTE net interest margin between 2.20% and 2.25%, with provision for credit losses expected to be $10-$11 million.
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